Economics is often used in literary studies, but rarely free market economics. Austrian economics, with its emphasis on subjective value (Menger), human action (Mises), spontaneous order and knowledge (Hayek), and entrepreneurship (Kirzner), seems a particularly fruitful source of ideas for literary studies.

Friday, January 27, 2012

The WSJ has a nice piece on Dierdre McCloskey. She of course points out that culture and rhetoric were central to the rapid economic development of the West shortly after the Renaissance. In other words, a

shift in perceptions was central to the economic take-off of the West. "A bourgeois deal was agreed upon," she says. "You let me engage in innovation and creative destruction, and I will make you rich." A commercial class that was not ostracized or sneered at was thus able to activate the engine of modern economic growth.

Of course, now we see the commercial class ostracized and sneered at. What are the consequences of this? What will be the long-term consequences if it continues? Perhaps, as I suggested recently, we need to see a change in how the commercial class is represented in literature (broadly defined, including T.V. and film). In other words, we need to see a shift in our culture and rhetoric.

Monday, January 23, 2012

Peter Klein has a nice little piece on Charles Dickens, Capitalist over at The Beacon. Indeed, I had heard all my life how anti-capitalist Dickens was, but when I finally did read one of Dickens' novels -- Oliver Twist -- I was overwhelmed by how overtly pro-capitalist and anti-government (it is particularly damning of government welfare programs) it was. One could make a career of recovering Dickens from the Marxist interpretations.

Saturday, January 21, 2012

Language is a spontaneous order, a fact we forget, being embedded in it and often failing to note the changes which take place, so slow does language (often) change. However, it is noted in this piece that English language pronunciation was undergoing rather rapid change during the Renaissance. Both typically slow, but sometimes rapid, change is typical of transformative complex adaptive systems, among which are spontaneous orders. By remembering the fact that the system changes content, we can rediscover such things as Shakespeare's language -- and the puns and rhymes we have lost over the past 400 years.

Friday, January 20, 2012

In Book I, Ch. 10 of Goethe's Wilhelm Meister’s Apprenticeship, we have the following famous dialogue between Wilhelm and Werner:

"Well, here is The Youth at the Parting of the Ways; it has just come into my hand,” said Wilhelm, drawing out a fold of papers from the rest; “this at least is finished, whatever else it may be.”

“Away with it, to the fire with it!” cried Werner. “The invention does not deserve the smallest praise: that affair has plagued me enough already, and drawn upon yourself your father’s wrath. The verses may be altogether beautiful; but the meaning of them is fundamentally false. I still recollect your Commerce personified; a shrivelled, wretched-looking sibyl she was. I suppose you picked up the image of her from some miserable huckster’s shop. At that time, you had no true idea at all of trade; whilst I could not think of any man whose spirit was, or needed to be, more enlarged than the spirit of a genuine merchant. What a thing it is to see the order which prevails throughout his business! By means of this he can at any time survey the general whole, without needing to perplex himself in the details. What advantages does he derive from the system of book-keeping by double entry! It is among the finest inventions of the human mind; every prudent master of a house should introduce it into his economy.”

“Pardon me,” said Wilhelm, smiling; “you begin by the form, as if it were the matter: you traders commonly, in your additions and balancings, forget what is the proper net-result of life.”

“My good friend, you do not see how form and matter are in this case one; how neither can exist without the other. Order and arrangement increase the desire to save and get. A man embarrassed in his circumstances, and conducting them imprudently, likes best to continue in the dark; he will not gladly reckon up the debtor entries he is charged with. But on the other hand, there is nothing to a prudent manager more pleasant than daily to set before himself the sums of his growing fortune. Even a mischance, if it surprise and vex, will not affright him; for he knows at once what gains he has acquired to cast into the other scale. I am convinced, my friend, that if you once had a proper taste for our employments, you would grant that many faculties of the mind are called into full and vigorous play by them.”

“Possibly this journey I am thinking of may bring me to other thoughts.”

“O, certainly. Believe me, you want but to look upon some great scene of activity to make you ours forever; and when you come back, you will joyfully enroll yourself among that class of men whose art it is to draw towards themselves a portion of the money, and materials of enjoyment, which circulate in their appointed courses through the world. Cast a look on the natural and artificial productions of all the regions of the earth; consider how they have become, one here, another there, articles of necessity for men. How pleasant and how intellectual a task is it to calculate, at any moment, what is most required, and yet is wanting, or hard to find; to procure for each easily and soon what he demands; to lay-in your stock prudently beforehand, and then to enjoy the profit of every pulse in that mighty circulation. This, it appears to me, is what no man that has a head can attend to without pleasure.”

Wilhelm seemed to acquiesce, and Werner continued.

“Do but visit one or two great trading-towns, one or two sea-ports, and see if you can withstand the impression. When you observe how many men are busied, whence so many things have come, and whither they are going, you will feel as if you too could gladly mingle in the business. You will then see the smallest piece of ware in its connexion with the whole mercantile concern; and for that very reason you will reckon nothing paltry, because everything augments the circulation by which you yourself are supported.”

Werner had formed his solid understanding in constant intercourse with Wilhelm; he was thus accustomed to think also of his profession, of his employments, with elevation of soul; and he firmly believed that he did so with more justice than his otherwise more gifted and valued friend, who, as it seemed to him, had placed his dearest hopes, and directed all the force of his mind, upon the most imaginary objects in the world. Many a time he thought this false enthusiasm would infallibly be got the better of, and so excellent a soul be brought back to the right path. So, hoping in the present instance, he continued: “The great ones of the world have taken this earth of ours to themselves; they live in the midst of splendour and superfluity. The smallest nook of the land is already a possession, none may touch it or meddle with it; offices and civic callings bring in little profit; where, then, will you find more honest acquisitions, juster conquests, than those of trade? If the princes of this world hold the rivers, the highways, the havens in their power, and take a heavy tribute from everything that passes through them, may not we embrace with joy the opportunity of levying tax and toll, by our activity, on those commodities which the real or imaginary wants of men have rendered indispensable? I can promise you, if you would rightly apply your poetic view, my goddess might be represented as an invincible, victorious queen, and boldly opposed to yours. It is true, she bears the olive rather than the sword; dagger or chain she knows not; but she, too, gives crowns to her favourites; which, without offence to yours be it said, are of true gold from the furnace and the mine, and glance with genuine pearls, which she brings up from the depths of the ocean, by the hands of her unwearied servants."

This sally somewhat nettled Wilhelm; but he concealed his sentiments, remembering that Werner used to listen with composure to his apostrophes. Besides, he had fairness enough to be pleased at seeing each man think the best of his own peculiar craft; provided only his, of which he was so passionately fond, were likewise left in peace.

“And for you,” exclaimed Werner, “who take so warm an interest in human concerns, what a sight will it be to behold the fortune which accompanies bold undertakings distributed to men before your eyes. What is more spirit-stirring than the aspect of a ship arriving from a lucky voyage, or soon returning with a rich capture? Not alone the relatives, the acquaintances, and those that share with the adventures, but every unconcerned spectator also is excited, when he sees the joy with which the long-imprisoned shipman springs on land before his keel has wholly reached it, feeling that he is free once more, and now can trust what he has rescued from the false sea to the firm and faithful earth. It is not, my friend, in figures of arithmetic alone that gain presents itself before us; fortune is the goddess of breathing men; to feel her favours truly, we must live and be men who toil with their living minds and bodies, and enjoy with them also.”

This is of course the passage where Goethe (actually, Werner, as we cannot attribute the beliefs of a character to their author) famously proclaims that one of the greatest inventions of mankind to be double entry bookkeeping. Don Lavoie would seem to agree:

The practice of accounting, that is, of the calculation of profit/loss accounts in terms of money outlays and receipts, both ex ante and ex post, has enabled human beings to orient their productive activities to one another in such a manner as to permit social production as a whole to be carried on with a very high degree of complexity." ("Economic Chaos or Spontaneous Order? Implications For Political Economy of the New View of Science," Cato Journal, Vol. 8, No. 3, Winter 1989, pg. 630-1)

We see, though, that this is a passage that discusses the poet's relationship to commerce, and Werner chastises Wilhelm for his negative portrayal of commerce, arguing that, instead, the poets ought to view such a vital activity as truly beautiful. Werner points out that commerce is in fact orderly (compare this to the socialist complaint about it being disorderly, to which Lavoie was in part giving answer with his comments on accounting, which is similar to the point made by Werner), that commerce brings out the best in men, makes them benefit themselves and others, and bring forth the earth's riches while bringing the world peace (as suggested by the goddess of commerce being described as having an olive branch rather than a sword). In the end, Werner argues, commerce is not about arithmetic, but about human gains.

How is all of this brought about? By accounting -- by double entry bookkeeping. This allows each business to order itself, and thus to bring about a spontaneous economic order. Of course, this cannot be done without money prices. As the Austrian economists argued, economic calculation cannot be accomplished without money prices. This is accomplished through "the system of book-keeping by double entry! It is among the finest inventions of the human mind; every prudent master of a house should introduce it into his economy." Doing so would no doubt help us all order our own economies quite a bit better than the slap-dash way we do it. Goethe recognized, through his character Werner, that this one development, which did in fact take place at the foundation of modern capitalism, has allowed us to order our lives, create wealth for everyone, and materially improve everyone's lives. Without money prices, one cannot have double entry bookkeeping, and without double entry bookkeeping, we could not have economic order.

It seems apparent Wilhelm is not quite convinced, but he does at least have a certain decency about him: "he had fairness enough to be pleased at seeing each man think the best of his own peculiar craft; provided only his, of which he was so passionately fond, were likewise left in peace." A very libertarian thought.

Wednesday, January 18, 2012

I am reading Don Lavoie's "Economic Chaos of Spontaneous Order? Implications for Political Economy of the New View of Science" (Cato Journal, Vol. 8, No. 3, Winter 1989), and it is like reading something from Frederick Turner (whose work I cannot recommend enough, and not just because he was a dissertation adviser). He sees the "new science" of complexity, emergence, chaos theory, self-organization, information theory, and related theories as an exciting development -- not least because they confirm Austrian insights. Consider, then, these paragraphs:

As Polanyi’s work on science as a spontaneous order shows, the modernist conception of the nature of knowledge is fundamentally flawed. Modernism treats the process of science as if it were a matter of an isolated mind confronting and mastering the natural world. A single scientist follows given methods to bring nature under his rational control. The new view of science urges instead that it is the dialogue taking place in the scientific community as a whole which is the proper locus of analysis for the philosophy of science. It is the uncontrolled “dialogical” process that brings knowledge to the participants, not the strictly controlled “monological” methods of any particular scientist. The process of mutual interpretations and criticisms going on in the scientific community is a good example of an order that emerges out of an apparently haphazard chaos. The process works best precisely when it is not under any one mind’s control but is allowed to evolve by its own logic, taking advantage of the variety of perspectives it contains. A healthy scientific community cannot be designed in detail, it can only be cultivated by setting up conditions where the freedom of individual scientists to pursue their own hunches is protected.

The “order” we find in a spontaneous order process may be closely akin to that of a story whose plot we can “follow” without claiming to be able to anticipate it from the outset. Here the theory of narrative as it has been developed in the study of history and fiction is relevant to scientific explanation. As the philosopher Paul Ricoeur has shown, the articulation of history has an irreducibly narrative character, and good history shares many of the attributes of good fiction. Essentially to impart the subjective meaning and significance of events in history involves us not in a mechanistic search for determinate laws but in the uniquely human act of storytelling.

There is so much to work with in just these two paragraphs. For example, the way he describes spontaneous orders as a dialogue supports the idea of the arts as spontaneous orders. The artistic canons emerge in the unfolding of history, and are the story of that history, the history of the art in question. Multiple interpretations and criticisms are of course the core of literary analysis -- and literary production. In many ways Toni Morrison and Cormac McCarthy are different interpretations of William Faulkner's novels. Economists would do well to read more novels and watch more plays and movies. And to learn how to interpret the text of the world.

Tuesday, January 10, 2012

Each economy has its own systemic resource. In the market economy, it is money. In the gift economy, it is reputation. In the democratic economy, it is votes.

Within the artistic order, an artist's fellow artists’ acknowledgement of them as an artist of note, not money, is their most important systemic resource. In this sense, the arts resemble the scientific order, where scientific reputation is the coin of the realm. The same is true with philanthropy -- a good reputation keeps the money coming in, so you can continue to do good. The arts, philanthropy, and science are in the gift economy, suggesting that reputation may be the systemic resource of all spontaneous orders in the gift economy.

But how does one gain systemic resources?

The artist gains reputation by producing works that other artists deem worthy of being influential on their own works. The scientist gains reputation by publishing scientific works that other scientists agree are true. The philanthropist gains reputation by doing good works.

How does one gain money? By doing work in the economy -- by providing work someone is willing to pay for.

How does one gain votes? Through rhetoric, campaigning, voting on bils (if one is elected) -- in other words, through political work.

No matter the systemic resource, then, one gains it through work.

Usually.

What would we think of a novelist who gained reputation because her father had written great novels, not because her own novels were good? What would we think of a scientist who gained reputation because of the discoveries of his mother, not because he discovered anything? What would we think of a philanthropist who gained reputation because her mother was altrustic, not because she gave to anyone?

What would/do we think of a politician who was elected because he had the same name as his father?

This being the case, one can begin to see why it is that some people have a real problem with inheritance. They wonder why this should be the one systemic resource that is heritable.

Or consider a different situation. What would we think of a painter who gained reputation because the scientific community decided to give it to them, even though they had not produced any artistic works? What would we think of a scientist who gained reputation because the philanthropic community decided to give it to them, even though they had not produced any scientific works? What would we think of a philanthropist who gained reputation because the artistic community decided to give it to them, even though they had not done any good works?

What would/do we think of a politician who gained votes because of money?

This being the case, we can begin to see why it is that some people have a real problem with welfare. The systemic resources of one spontaneous order should not be used to influence the work (or lack of work) done in the others.

I think we can also see why artists in particular are such snobs in relation to money's influence on the arts. Indeed, I think we can begin to see why it is that those in the gift economy tend to be anti-market (and anti-government). They don't want other orders influencing their. They should, of course, grant the other orders the same courtesy.

At the same time, one does have to eat. The artist, the scientist, the philanthropist (a little more obviously, since much of the good they do involves money) all have to eat, and thus all have to have money. The problem with being in the gift economy is that one is not guaranteed to get monetary gifts in return. We in the gift economy end up having to work twice as hard -- working in both the market and the gift economy. Such, though, is life. We all live in multiple orders.

Now, one does not have to agree with people who oppose inheritance -- or even welfare -- but I think it helps to understand where such opposition comes from. It comes from how we understand the relationships between various systemic resources and work. The opposition, too, to usury comes from the perception that the person gaining interest from the loan hasn't worked for it. We forget that the person who borrowed the money has in fact bought something: time.

Of course, money is more tangible than the other systemic resources I discussed. (Votes, I suppose, are more tangible than reputation, but less so than money.) And money itself is capable of becoming its own spontaneous order within the market economy (and would create a much healthier catallaxy were it to become so). These things matter. Yet, understanding the relations between work and systemic resources does give us, I think, some insight into the problems some people have with certain institutions.

Sunday, January 8, 2012

All else equal, people in respected professions make less money. The mechanism is simple:

1. People like to be respected.2. People know that if they enter a respected profession they will personally enjoy more respect.3. This increases the supply of people in the respected profession, which in turn drives down their wages.

So what happens to inequality when one profession becomes more respected? It depends. If people in the profession currently earn less than average, then giving them more respect increases inequality. But if people in the profession currently earn more than average, then giving then more respect actually decreases inequality.

Now for the fun part. Imagine people become more egalitarian, to the point where they heap scorn on the rich and successful. What is the effect on inequality? By the previous logic, the effect is directly counter-productive. The more you scorn rich people, the more people you scare away from high-income professions. The more you scare away, the lower their supply. And the lower their supply, the higher their income!

Lesson: If you really want a materially more equal society, stop beating up on the 1%. Do a complete 180. Smile upon them. Admire them. Praise them. Sing songs about how much good they do for the world. The direct result will be to raise their status. But the indirect result will be to pique the envy of status-conscious people, increasing the competition among the top 1%, and thereby moderating income inequality.

On the other hand, if you want to increase material inequality, by all means heap scorn on the rich and successful. Try to fill them with guilt and self-loathing. The 1% who remain will find that living well is the best salve for their consciences.

Thus, those leftist authors who heap scorn on business people have been contributing to income inequality. They should all become libertarians, learn to appreciate the work business people do, write stories that celebrate their work, thus encouraging more people to go into business, thus driving down wages through competition. That's not the only reason they should become libertarians (of the thick kind, which I argue best mirrors reality), but it's a pretty good one, considering the role of literature as immanent criticism on our various spontaneous orders, culture, and civil society. Immanent criticism, too, can have unintended consequences!

Friday, January 6, 2012

An interesting interview with Jonathan Galassi, "One of the wunderkinds of the New York editing and publishing world," at The Economist.

Toward the end, he essentially argues for poetry's role as immanent criticism on civil society. Can something on the one hand act as immanent criticism for spontaneous orders, and on the other hand be a part of its own spontaneous order? I think so.

the "order" of the market emerges only from the process of voluntary exchange among the participating individuals. The "order" is, itself, defined as the outcome of the process that generates it. The "it," the allocation-distribution result, does not, and cannot, exist independently of the trading process. Absent this process, there is and can be no "order."

He of course is talking about the market order, but this is equally applicable to other spontaneous orders, including the literary order. The literary order is the outcome of the process of literary writers writing, and readers reading, resulting in feedback that creates patterns of literary production. How are literary works "allocated" and "distributed"? How do those differences affect the literary order?

Reading patterns -- which give rise to the literary canon -- emerge through the very process of reading, following recommendations of other readers (and of writers), etc. Those who argue that the literary (or other artistic) canon is what it is because of this or that group who are picking and choosing what is in the canon to perpetuate class, racial, gender, etc. interests are the same people who support socialism and interventionism for a reason -- they do not understand these processes are spontaneous orders, and do not believe order can emerge without someone creating the order.

Thursday, January 5, 2012

In "Creating a Culture of Gift" (Conversations on Philanthropy, Vol. II: New Paradigms (2005)), Frederick Turner argues that there are five fundamental types of economies: the political economy, the market economy, the gift economy, the environmental economy, and the divine economy. With the exception of the environmental economy, or ecosystem, all of these can be rationally constructed by human beings into organizations, or allowed to develop naturally as spontaneous orders (and mixtures of the two, in interventionist economies).

The spontaneous order political economy is democracy/common law. The spontaneous order market economy is the catallaxy. The spontaneous order gift economy is actually made up of three kinds of spontaneous orders, each representing the three aspects of the gift economy -- the good, the true, and the beautiful become the philanthropic, scientific, and artistic orders. And the spontaneous order divine economy would be what we see in places like the United States, where separation of church and state results in a proliferation of beliefs.

The organizational political economy is dictatorship (not necessarily monarchical). The organizational market economy is central planning socialism. The organizational gift economy is also central planning socialism (the good), but includes central planning science and central planning art (propaganda). The organizational divine economy would be similar to what we saw in Medieval Catholic Europe. Of course, these can be variously combined.

If the spontaneous orders are combined, we get liberal civil society. If the organizational economies are combined, we get something that resembles Stalinsim.

Are there other liberal spontaneous orders? What kind of economy, for example, is the internet? Is it truly distinct? If so, we should expect it to affect the other orders (much as each of the spontaneous orders affect all the other orders).

How might the internet affect the artistic (esp. literary) order? How is it affecting it? In what ways do the other orders affect the literary order?

Wednesday, January 4, 2012

Steve Horwitz on the analogy between language and money, from "Money, Money Prices, and the Socialist Calculation Debate" in Advances in Austrian Economics, Vol. 3:

One fruitful way of understanding the importance of money as a social institution (and its role with respect to economic calculation) is to see that money's role in the market is analogous to language's role in other human interaction. In the same way that language enables us to transcend our individuality and our physical senses by opening up a means of social communication, so does money enable us to communicate our subjective preferences in the market. In addition to being analogous to language, money also extends our range of communication beyond language by enabling us to make our inarticulate (and thus linguistically inaccessible) knowledge socially usable. The power of the analogy between money and language derives from both being spontaneously evolved means of exchange. The medium of exchange function of money is well-known to economists and the items being exchanged are goods and services. For language, it is mental phenomena that are "exchanged" by being constituted in a language that is accessible to other thinkers. (p. 63-4)

Let us reverse this, and consider how what we understand about money could help us to understand language. Money prices are a "stand-in" for value, much in the same way that the referential aspect of language allows for certain sound combinations to act as a "stand-in" for certain objects, actions, relationships, quantities, or qualities. Thus, in the same way that the quantity of money can affect the distribution of goods (through inflationary and deflationary effects), words can affect many of the things they "stand-in" for.

Let me use an example. Although the statement that "All sex is rape" has been falsely attributed to Andrea Dworkin and Catharine MacKinnon because of summaries of the former's views by her critics (and to the latter, because of her association with the former), the fact of the matter is that this statement, regardless of its origin, is now in the public imagination -- and is probably accepted by many who would abhor the ideas of the critics of Dworkin.

Such an association of all sex with rape has the same effect of printing more money than there is demand for -- the term "rape" becomes devalued, and the act, too, thus becomes devalued. Sex is not similarly affected, because most adults have had sex (and fewer have raped or been raped), and most people do not consider most sex rape, let alone all sex. More casual attitudes toward rape are more likely to emerge than are disapproving attitudes toward sex. If it were a vin diagram, "all sex" would fill a large circle, while "rape" would fill a smaller circle within that larger one, with most of the larger circle being "non-rape sex" (there is likely to be "acceptable" and "non-acceptable" sex within the "all sex" circle, too, with rape being in the "non-acceptable" region). "All sex is rape" expands "rape" into the "non-sex" area, including everyone's "acceptable" area. Rape is thus re-conceived as being more acceptable.

Of course, classical liberals make the distinction between coercive and non-coercive acts, but not everyone does. Libertarians agree that taxation is a coercive act -- that taxation is theft -- but others disagree. Thus, is it possible for a coercive act to become socially acceptable. This is different from the point in regards to acceptable vs. non-acceptable sex acts, which amount to personal preferences (which some people think validates the use of coercive measures to ensure others also acts according to their personal preferences). Nevertheless, the acceptable-unacceptable line changes with social-cultural evolution. The "acceptable" region is more likely to expand than the "unacceptable" region. A similar point along these lines could be made in regards to same-sex marriage -- that expanding same-sex unions into the "acceptable" region doesn't make opposite-sex marriage "unacceptable". Nor does it mean that we have to accept forcible marriages (although non-coercive polygamy is up for grabs). Just because two things are unacceptable, that doesn't mean they are unacceptable in the same way.

Or think about it this way. It is one thing to say, "All humans are animals," but it is another thing to say, "All animals are human." It is possible to argue, from the first, that while we are animals, we have certain features that make us distinctly human. But if we accept the latter, then we cannot argue for distinct differences. That makes a difference in our attitudes toward humans. It is the attitude we get from someone like philosopher Peter Singer, who on the one hand argues for animal rights, and on the other hand argues for human eugenics. The two attitudes, for Singer, stem from the fact that he essentially believes "all animals are human." One does not have to believe that and support animal rights; but if you do believe it, you will come to the conclusions of Peter Singer.

As we can see, words (or groups of words as terms) refer to a shifting reality. Yet the inflationary effects only work in certain ways. Whether or not this would apply to monetary inflation is up to monetary theorists like Steve Horwitz to address.

Glaeser: I think the most important thing cities do today is to allow the creation of new ideas. Chains of collaborative brilliance have always been responsible for human kind’s greatest hits. We have seen this in cities for millennia – Socrates and Plato bickered on an Athenian street corner; we saw it again in Florence with the ideas that went from Brunelleschi to Donatello to Masaccio to Filippino Lippi and to the Florentine Renaissance. It helps us to know each other, learn from each other and to collectively create something great. In some sense, cities are making us more human.Our greatest asset as a species is the ability to learn from the people around us. We come out of the womb with this remarkable ability to take in information from those people – parents, peers, teachers – that are near us. Cities enable us to get smart by being around other smart people. I think this explains why cities have not become obsolete over the past thirty years.

Of course, just being in a city isn't enough. You also have to get out of the house, and you have to hang out in the right places at the right time.

Which only raises the question: where are the right places? This differs from city to city, of course. And among cities. What is it about ancient Athens, Renaissance Florence, interwar Paris, and modern-day New York that make them intellectual centers? (And if it is no longer New York, where is it?)